Question 112. Who can participate in the voluntary funded pension component?

Any person can be a participant of the voluntary pension component regardless of age and regardless of the fact that he participates in mandatory funded or PAYG pension system. 

The voluntary funded pension is called the 3rd component of the pension system. Making voluntary contributions a person is entitled to receive extra pension. Employers also can make voluntary contributions in the favor of an employee by joining any pension scheme of the voluntary funded pension. The amount of voluntary funded payment will be determined by mutual agreement of the parties: the party making the payment and the financial organization offering voluntary funded scheme. 

Question 113. What is the voluntary funded pension scheme and where to apply to obtain it?

In fact the voluntary funded pension scheme is a contract concluded between a person (in his or other person’s favor) or the employer (in the favor of an employee) and the provider of voluntary funded pension services for making voluntary contributions, voluntary pension accumulation and payments under certain conditions. Voluntary pension services can be provided by insurance companies, banks and voluntary pension funds. Insurance companies may offer only "defined pension" schemes, banks may offer “funded pension deposits” schemes and the voluntary pension funds may offer “defined pension contributions" schemes.

Question 114. Will a person benefit from tax exemptions if he participates in the voluntary funded pension component?

Participating in the voluntary funded pension component a person will benefit from income tax exemption. In particular, a participant’s taxable income will be deducted up to 5 percent. For example, if a participant’s basic monthly income is amounted to 100 000 AMD and he makes voluntary contribution at 5000 AMD, then his income tax will be calculated from 95 000 AMD. Employers are entitled to make deductions from the profit tax base, if they make voluntary pension payments in the favor of their employees. Determining the employer's taxable profit, gross income will be deducted at 50 percent of the voluntary funded pension contributions made by the employer for each employee but not more than 2.5 percent of the employee’s remuneration and other equivalent payments. 

The employer will not pay profit tax for the voluntary pension contributions made in the favor of the employee, which does not exceed 7.5 percent of the employee’s remuneration and other equivalent payments. 

Question 115. Can a participant of the voluntary funded pension component cease his participation at his own discretion?

A participant of the voluntary pension component is entitled to submit a claim for a lump-sum payment of his accumulated funds (deducted costs for the conclusion and implementation of insurance contract) at any time before attaining the pension age if at least two years passed from the date the participant made his first accumulative payment, contribution or insurance fee payment to the relevant pension fund, bank or insurance company. The exception is the case when the employer has obtained the voluntary pension scheme. 

In this case the tax is calculated at the following rates: 

• If the accumulated funds are amounted up to 120000 AMD - 24.4 percent;
• If the accumulated funds are amounted from 120 000 AMD to 2 000 000 AMD - 26 percent of the amount not exceeding the sum of 29280 AMD and 120 000 AMD,
• If the accumulated funds are amounted more than 2 000 000 AMD - 36 percent of the amount not exceeding the sum of 518080 AMD and 2 000 000 AMD. 

Question 116. Can the voluntary pension fund manager deal with the management of the accumulative pension funds.

According to the Law of RA on "Investment funds" pension fund manager is a legal person entitled to the management of the pension fund.
 
Registration and licensing of the pension fund managers are conducted by the Central Bank under the Law of RA on "Investment funds". Certain requirements and restrictions are defined over the pension funds by the above mentioned law. 

Requirements and restrictions submitted to the accumulative pension funds and voluntary pension funds are rather different. Therefore, pension fund manager licensed for the management of the voluntary pension fund cannot deal with the management of the accumulative pension fund. 

Mandatory rate of the funded pension contributions is defined as 10% of the basic salary. The participants willing to accumulate more than 10 % can do that with the voluntary pension funds, insurance companies or banks according to the Articles 66, 67 and 68 of the Law of RA on "Funded Pensions". 
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